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Arbitration / Court Decisions

MOTION TO RECONSIDER DENIED IN LAWSUIT AGAINST NATIONAL WORKER’S COMPENSATION REINSURANCE POOL

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We previously reported in a June 25, 2010 post on a lawsuit brought by plaintiff American Insurance Group, Inc., and its affiliates and subsidiaries, alleging underreporting of worker compensation premiums to the the National Worker’s Compensation Reinsurance Pool. That post discussed the court’s order on motions to dismiss brought by the defendants. The court has now ruled on a motion to reconsider the earlier order, granting the motion in part and denying it in part. Specifically, the court agreed with the Pool that the court was mistaken when it concluded that the Pool became the National Workers Compensation Reinsurance Association. The court affirmed, however, that the Pool has the capacity to be sued, since the Pool qualified as a voluntary unincorporated association that may sue or be sued in its own name. American International Group, Inc. v. Ace INA Holdings, Inc., Case No. 07 CV 2898 (USDC N.D. Ill. Sept. 16, 2010).

This post written by Brian Perryman.

NINTH CIRCUIT REVERSES CONFIRMATION OF ARBITRATION AWARD BASED ON IMPROPER FORUM

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The Ninth Circuit has reversed and remanded a district court’s confirmation of an arbitration award because the plaintiff/counterclaim defendant, a manufacturer located in Belarus, established a defense under the New York Convention. The parties agreed to an arbitration clause that requires disputes to be arbitrated where the “defendant” is located. Arbitration was commenced in California, but the plaintiff expressly reserved the right to have any counterclaims asserted against it arbitrated in Belarus. When counterclaims were filed, the arbitrator refused to dismiss them on the ground they should have been filed in Belarus. The district court confirmed the California arbitrator’s award against the plaintiff, which appealed to the Ninth Circuit.

On appeal, the court held that procedures used in the arbitration of “counterclaims” were not in accordance with the agreement. Invoking a defense under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), the plaintiff contended the “arbitral procedure was not in accordance with the agreement of the parties” because the counterclaims should have been arbitrated in Belarus. The Ninth Circuit agreed. The arbitration agreement required that any “dispute” be arbitrated at “the defendant’s [site].” The term “dispute” encompassed both claims and counterclaims. Further, a party is a “defendant” as to any dispute whenever another party seeks damages or other form of relief against it. Polimaster Ltd. v. RAE Systems, Inc., No. 08-15708 (9th Cir. Sept. 28, 2010).

This post written by Brian Perryman.

EIGHTH CIRCUIT REVERSES SUMMARY JUDGMENT DUE TO FACTUAL ISSUES REGARDING ELECTRONIC TRANSFER OF CLAIM DATA TO REINSURER

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The Eighth Circuit has reversed the district court’s entry of summary judgment that had disposed of the U.S. Government’s suit on behalf of the crop insurance reinsurer, Federal Crop Insurance Corporation (FCIC), against a crop insurance agent. The Government alleged various violations of provisions of the Federal Claims Act, including Section 3729(a)(1), which renders liable any person who knowingly “causes to be presented” to the United States Government a fraudulent claim for payment. The district court held that because the Government alleged that the agent “caused to be presented” fraudulent claims to the crop insurer and not the FCIC, the agent could not have caused fraudulent claims to be presented to the Government. Among other holdings, the Eighth Circuit held that a genuine issue of material fact existed as to whether the insurance agent “caused to be presented” fraudulent claims to the Government when the agent facilitated the submission of fraudulent claims to the insurer, which, in turn, transmitted the fraudulent claim data electronically to the FCIC. United States v. Hawley, No. 08-2992 (8th Cir. Aug. 23, 2010).

This post written by Michael Wolgin.

ELEVENTH CIRCUIT FINDS INSUFFICIENT EVIDENCE TO SUPPORT WAIVER OF ARBITRATION DESPITE ONE-MONTH DELAY PRIOR TO ARBITRATION DEMAND

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In a suit between a law firm and Citibank, the Eleventh Circuit reversed the district court’s denial of Citibank’s petition to compel arbitration despite its one-month delay in demanding arbitration. The Eleventh Circuit held that even assuming that Citibank “acted inconsistently with the arbitration right” by filing an answer that was silent on arbitration, the law firm did not provide adequate evidence that its research and filings prior to Citibank’s arbitration demand constituted sufficient prejudice to preclude arbitration. Although the law firm may have suffered some prejudice “when it expended time and resources preparing and filing an offer of judgment, reply, and notice of readiness for trial,” waiver was inappropriate because of the “brevity” of the one-month delay and because the law firm “could not point to any portion of the record that reveals either the amount of money it spent or the number of hours it dedicated to conducting litigation-specific discovery and preparing litigation-specific documents.” Citibank, N.A., v. Stok & Assocs., P.A., No. 09-13556 (11th Cir. July 20, 2010).

This post written by Michael Wolgin.

USF&G WINS $260M JUDGMENT AGAINST REINSURERS FOR UNDERLYING CONSOLIDATED ASBESTOS SETTLEMENT

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USF&G won a significant judgment against its reinsurers under certain reinsurance agreements covering liabilities in the 1950’s and early 1960’s (particularly 1959) in New York state court. USF&G, after protracted and largely unsuccessful coverage litigation with its insured, Western Asbestos Company, settled consolidated underlying asbestos claims for approximately $987 million (the settlement generally placed the liabilities in calendar year 1959). USF&G thereafter looked to its reinsurers under certain reinsurance agreements that covered that time period. The defendant reinsurers resisted, including American Re, under a certain reinsurance agreement for which USF&G sought $202 million, and another pool of reinsurers, under a reinsurance treaty for which USF&G sought an additional $59 million. The defendants asserted numerous theories limiting or eliminating their liabilities altogether, and the parties all cross-moved for summary judgment. The court rejected each of the defendants’ arguments, focusing principally on the follow-the-fortunes doctrine, and awarded USF&G the approximately $260 million in judgments it sought, along with interest and costs. United States Fidelity & Guaranty Co. v. American Re-Insurance Co., No. 604571/02 (N.Y. Sup. Ct. Aug. 20, 2010)

This post written by John Pitblado.